Home Shopping Network 2010 Annual Report Download - page 14

Table of Contents
advent of digital compression technologies and the adoption of digital cable has resulted in increased channel capacity, which together with other
changing laws, rules and regulations regarding cable television ownership, impacts the ability of HSN to secure suitable channel placement.
While increased channel capacity could provide a means through which the HSN television networks could be more widely distributed, it could
also adversely affect our ability to attract television viewers to the television networks and a reduction in our growth rate to the extent it results
in:
If the HSN television networks are carried exclusively in a system on a digital programming tier, HSN will experience a reduction in
revenue to the extent that the digital programming tier has less television viewer penetration than the basic or expanded basic programming tier.
In addition, HSN may experience a further reduction in revenue due to increased television viewing audience fragmentation and to the extent
that not all television sets within a digital cable home are equipped to receive television programming in a digital format. Our future success will
also depend, in part, on the ability of HSN to anticipate and adapt to technological changes and to offer elements of the HSN television networks
via new technologies in a cost-effective manner that meet customer demands and evolving industry standards.
The continued or permanent inability to broadcast the HSN television networks would result in lost customers and lost sales.
Our success is dependent upon the continued ability of HSN to transmit the HSN television networks to broadcast and pay television
operators from its satellite uplink facilities, which transmission is subject to the Federal Communications Commission (“FCC”) compliance.
HSN has entered into two satellite transponder leases to provide for continued carriage of the HSN television networks on a replacement
transponder and/or replacement satellite, as applicable, in the event of a failure of the transponder and/or satellite. Although we believe that
every reasonable measure is being taken to ensure continued satellite transmission capability, termination or interruption of satellite
transmissions may occur.
HSN is affiliated with a number of low power broadcast television station licensees (the “Low Power Licensees”) that broadcast
programming pursuant to licenses from the FCC. These Low Power Licensees are subject to regulation by the FCC under the Communications
Act of 1934, as amended, which prohibits the operation of broadcast television stations except in accordance with a license issued by the FCC
and empowers the FCC to issue, revoke, modify and renew broadcast television licenses, approve the transfer of control of any entity holding
such licenses, determine the location of stations, regulate the equipment used by stations, adopt necessary regulations and impose penalties for
related violations. The failure of the Low Power Licensees to comply with the terms of the broadcast licenses could result in the inability to
broadcast the HSN television networks on over-the-air facilities, as well as penalties. The prolonged or permanent interruption of satellite
transmission capability or other inability to transmit the HSN television networks for any reason, as well as related costs incurred, would result
in lost sales and could result in lost customers.
System interruption and the lack of integration and redundancy in these systems and infrastructures may adversely affect our ability to
operate websites, process and fulfill transactions, respond to customer inquiries and generally maintain cost-efficient operations.
Our success depends, in part, on our ability to maintain the integrity of our systems and infrastructures, including websites, information
and related systems, call centers and fulfillment facilities. We may experience
11
•
higher channel position placement for the HSN television networks;
• placement of the HSN television networks in digital programming tiers, which generally have lower levels of television viewer
penetration than basic or expanded basic programming tiers;
•
more competitors entering the marketplace; or
• more programming options being available to the viewing public in the form of new television networks and time-shifted viewing
(
e.g.
, personal video recorders, video
-
on
-
demand, interactive television and streaming video over broadband internet connections).